DaVita sells medical group division to UnitedHealth Group

DaVita Inc. has agreed to sell its medical group division to UnitedHealth Group for $4.9 billion in cash.

“I am so proud of the DaVita Medical Group accomplishments, including our excellent clinical outcomes as reflected in our star ratings performance, our strong emphasis on growing physician leaders, our teammate engagement and advancing the care model,” Kent Thiry, chairman and CEO of DaVita Inc., said in a press release. “The combination of DaVita Medical Group and Optum should lead to even higher levels of performance.”

DaVita Medical Group will become part of UnitedHealth Group’s OptumCare division, which works with more than 80 health plans and has affiliations with 30,000 physicians.

“Combining DaVita Medical Group and Optum advances our shared goal of supporting physicians in delivering exceptional patient care in innovative and efficient ways while working with more than 300 health care payers across Optum in ways that better meet the needs of their members,” Larry C. Renfro, CEO of Optum, said in a press release.

When DaVita acquired the physician services company in October 2012, which was then called Healthcare Partners, for $4.42 billion, it operated in California, Florida and Nevada and covered 667,000 patients through 152 medical clinics. Annual revenue was approximately $2.4 billion at the time. DaVita expanded the Medical Group’s reach and currently serves approximately 1.7 million patients per year in six states through nearly 300 medical clinics. The Medical Group also operates 35 urgent-care centers and six outpatient surgery centers.

Despite the expansion into other markets, DaVita has struggled to turn a profit with its medical group division, recording disappointing quarterly earnings for most of the past 5 years. The medical group posted a $5 million operating loss in the third quarter of this year.

Joe Mello, chief operating officer of DaVita Medical Group, will continue in a leadership role under UnitedHealth’s ownership, as will the DaVita Medical Group leadership team, according to the release. Plans include to use the proceeds from the transaction for significant stock repurchases during 1 year to 2 years following the closing of the transaction, as well as to repay debt and for general corporate purposes, according to the release.

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